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Good Night Strategy - Basic Rules

Thursday, 2 November 2017 00:00

The Good Night strategy is a simple and least time-consuming, but quite an effective trading technique. It is a modified version of the traditional Va-Bank system, and it’s used to work with daily charts.

TC Good Night is loved by the traders who like to leave the terminal on overnight, seeing a significant sum on the account in the morning.

The main advantage of such a system is its simplicity. In fact, the trader will have to spend almost 20 minutes a day to analyze the market and control the positions. Also, due to the simplicity of the algorithm, it’s quite difficult to break such a strategy - it makes it even more attractive, comparing to other trading strategies.

The Essence of the Strategy

The basic idea of the system is quite simple: you need to enter the market after a strong price movement, waiting for a turn. On the daily chart, 2 or 3 large candlesticks of the same direction appear rarely. Usually, there is a small drop between them, which you need to catch.

It remains only to find out how to determine a definite trend, after which you need to enter the position. To do this, follow these rules:

Determine the average volatility of the asset under consideration during the previous ten weeks. It can be done with the help of indicators, but it will be much more convenient to use online services. With such programs, you can see the dynamics of the movement of any currency pair or financial asset for a given period.

If the price is already crossed half of the average daily range, a trader can open order. Most likely, there will be a rollback next day. The more distance the price passed from the average range per day, the higher the probability of a turn next day.

It’s also important considering that there may be a small rollback of the candlestick, not a price reversal – this is what we search for. There may be reversals later.

You need to enter the market at 10 o'clock in the evening, either at a market price or through a pending order. If you choose the latter option, just set the position based on the fact that the price will move for some time in the previous direction.

Sometimes the price doesn’t reach the pending order and turns in the other direction - these are the features of the market, which are difficult to predict.

As for the Take Profit and Stop Loss, the author recommended setting TP to 50 p and Stop Loss to 100 p. Those who are not familiar with the initial Va-Bank strategy may be embarrassed, because the indicators may seem strange. However, as practice shows, there is one loss-making transaction fixed for five profitable trades; that is, for 250 pips of profit, there are only 100 pips lost.

Indicators Used in Good Night Strategy

To get rid of the constant volatility calculations, analysis of the price movement for the day and comparing all the data with each traded pair, you can use the i_vabank technical indicator.

The application will calculate the size of the candlestick body automatically. The data will be displayed in the information window. In particular, you can see the opening and closing prices, as well as the spread for each pair. Pay particular attention to the body of the candlestick – if this figure is equal to 80-100 pips, this is a powerful signal to enter the market.

It’s quite simple to customize the indicator since it has only two parameters (this is a main plus when working with the Strategy):

Shift - the shift parameter of the timeline. If you set "0", it means that the indicator shows the data for the current day, "1" indicates that the program displays information for yesterday;

Usecarr - parameter of the update rate of the information. A real value sets the need for an update with each tick, “false” - when the new candle opens.

Tips for the Work with Strategy

As you can see, the Good Night system is quite simple. Signals for entering the market can be calculated either manually or through the online services, as well as using a technical indicator.

Numerous tests on different currency pairs showed a meager percentage of losing trades. Of course, such results can be achieved only by the correct money management, and with the exact adherence to the rules of the trading strategy. Even if you closed several profitable trades in a row, continue to be guided by common sense, don’t rush into trading decisions making, and then you will see the effectiveness of the Good Night strategy.

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David Melton

Financial expert. I work with investors and different companies. I write analytical reviews for newspapers and TV channels and I also manage researching projects